If at the Prevailing Interest Rate the Quantity of Money

question 74

Multiple Choice

If at the prevailing interest rate the quantity of money demanded is $2 trillion, and the supply of money is $1.5 trillion, then which of the following is true ?

• A) There is a shortage of money, and consequently interest rates must fall in order to achieve an equilibrium in the money market.
• B) There is a surplus of money, and consequently interest rates must fall in order to achieve an equilibrium in the money market.
• C) There is shortage of money, and consequently interest rates must rise in order to achieve an equilibrium in the money market.
• D) There is a surplus of money, and consequently interest rates must rise in order to achieve an equilibrium in the money market.

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Definitions:

Variation

The measure of dispersion within a data set, indicating how much individual data points differ from the mean.

Sunlight

Natural light emitted by the sun, crucial for plant photosynthesis and providing warmth and visibility for humans.

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Flowering plants notable for their fragrant blooms, consisting of many species and cultivated in a variety of colors.

Straight Enough

A colloquial term often requiring context for accurate definition; in general, it refers to something meeting a satisfactory standard of straightness.